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Payments Strategy - Renew the Old, Ring in the NewBy Robin Arnfield, contributing writer, ATM Marketplace and Mobile Payments Today PRESENTED BY:

DEVELOPED AND PUBLISHED BY:

http://WWW.MOBILEPAYMENTSTODAY.COM

2Payments Strategy - Renew the Old, Ring in the New | © 2015 Networld Media Group

Page 3 Executive summary

Page 7 Introduction

Page 9 Survey analysis

0 Conclusion

Page 21 References

CONTENTS

Published by Networld Media Group © 2015 Networld Media GroupWritten by Robin Arnfield, contributing writer, MobilePaymentsToday.com.Tom Harper, president and CEOKathy Doyle, executive vice president and publisherWill Hernandez, editorBrittany Warren, custom content editor

Robin Arnfield

Robin Arnfield has been a technology journalist since 1983. His work has been published in ATM Marketplace, Mobile Payments Today, Kiosk Marketplace, Virtual Currency Today, ATM & Debit News, ISO & Agent, CardLine, Bank Technology News, Financial Times, Cards International, Retail Banker International and Electronic Payments International. He has covered the United Kingdom, European, North American and Latin American payments markets.

http://www.atmmarketplace.com

http://www.mobilepaymentstoday.com

http://www.mobilepaymentstoday.com

http://www.kioskmarketplace.com

http://www.virtualcurrencytoday.com

http://www.virtualcurrencytoday.com


Despite advances in digital payments, tril-lions of dollars in cash are still in circulation worldwide. In the U.K. alone, there were just over 18 billion cash payments in 2014, and cash was used by consumers for 53 percent of transactions, according to Payments UK. The Federal Reserve estimates that in August 2015 $1.38 trillion in U.S. currency was in circulation.

To drive these cash payments to digital payments, all participants in the pay-ments industry, from incumbent payments services organizations to non-banking and emerging payments providers, need to work to make digital payments more conve-nient, faster, easier, secure, and seamless across multiple channels for consumers. Governments and regulators like this too!

Existing players are far too often stifled by legacy systems that hold them back. The upstarts and the FinTechs are making bold forays with their focus on user experience and eliminating the “friction” inherent in payments. For most players, the way for-ward involves adopting a strategy of renew-ing existing infrastructures and introducing new technologies - “renew the old, ring in

EXECUTIVE SUMMARYthe new.” As part of this “new and renew” transformation process, technologies sup-porting new digital efforts such as mobility, near-field communication (NFC), digital wallets, tokenization, real-time clearing and settlement, and omnichannel integration are key. While being digital is essential, players need to ensure that their legacy systems can handle key digitization efforts and plan for, and implement, what their customers want now and in the future.

Teaming up with an experienced and creative multinational partner with pay-ments industry expertise will be essential to successfully navigate the “new and renew” transformation process.

ments Today conducted a survey of pay-ments industry executives worldwide in summer 2015.

The survey, presented by Infosys Ltd, sought to identify how payments providers can remain competitive by renewing their existing legacy systems and processes to extract maximum efficiency and perfor-mance, while innovating with new systems, practices and technologies to create further value to meet customer expectations and enhance the overall customer experience with secure innovative technologies.

Of the 380 respondents, the largest share are headquartered in North America, fol-lowed by respondents headquartered in Europe, Asia-Pacific, Latin America/South America, and Africa.

Over half (55 percent) of respondents said their annual revenues are below $500 million, while 17 percent have revenues of over $5 billion, 15 percent have revenues of $0.5-$1 billion, and 12 percent have revenues of $1-$5 billion.

The top categories of respondents were payment services providers (31 percent), followed by banks (27 percent), payments networks (23 percent) and merchant services providers (20 percent). Survey respondents covered most of the payments services ecosystem.

ATM Marketplace and Mobile Payments To-day thank Infosys for allowing us to share this information with you at no cost. We also thank all the participants in our survey.

Global SurveyTo gain an understanding of the priorities, benefits and challenges that payments organizations will encounter as they make this “new and renew” transformation a reality, ATM Marketplace and Mobile Pay-

“In order to succeed in a world which is being irrevocably digitized, payments organizations must renew their core systems and simultaneously innovate into new frontiers.”Source: Infosys Ltd

http://www.cashservices.org.uk/sites/default/files/payments_uk_uk_cash_and_cash_machines_summary.pdf



PrioritiesOver two-thirds (69 percent) of respon-dents said gaining new customers is a pri-ority for their digital strategy in 2015-2016, while 35 percent identified increasing cus-tomer satisfaction metrics, and 40 percent identified creating a unified experience for their customers.

In addition, 40 percent identified offering customers omnichannel options as a prior-ity, and 41 percent said gaining a competi-tive edge over traditional and/or emerging competitors is a priority.

Over a third (37 percent) of respondents mentioned that they are using digital tech-nologies to better understand customer dynamics. Additionally, 40 percent are using digital technologies for faster transaction ca-pability, 35 percent to increase security, 36 percent to improve upselling/cross-selling opportunities and 39 percent to provide om-nichannel capabilities for their customers.

Digital StrategyThe IT department is responsible for digital strategy for the largest share of respondents, versus a dedicated digital team.

Just under half (43 percent) of respondents said their IT organization oversees their company’s digital strategy, while 24 percent replied that the person at their company who is responsible for digital strategy re-ports to the CEO.

Over a quarter (26 percent) said their com-pany has implemented a cross-organiza-tional digital task force, while 17 percent of the companies that responded have hired or will hire a chief digital officer to oversee digital initiatives; 13 percent have a central-ized digital center of excellence to drive digital adoption.

percent Software-as-a-Service (SaaS), 8 percent blockchain technology and 3 percent artificial intelligence. The last two points dem-onstrate the impact of newly created FinTech technologies in payments solutions.

Fraud-prevention investmentsAs expected, because of recent and on-going initiatives primarily in North America, EMV tops the list of respondents’ fraud-prevention efforts. Half (50 percent) of respondents have either invested in or plan to invest in EMV, while 46 percent listed tokenization, 46 percent real-time fraud-prevention practices and 31 percent HCE.

Nearly a third (31 percent) said they have either invested in or plan to invest in biometric authentication techniques such as fingerprint scanning or voice authentica-tion, while 37 percent identified data-driven analytics and predictive analysis for fraud management.

Asked how confident they are that their company is prepared to handle security threats, nearly two-thirds (60 percent) of the 252 respondents to this question gave a rating of 4 or “5 extremely confident.” Only seven rated their confidence as “1 not confident at all”; 24 gave a rating of 2; 71 gave a rating of 3; 97 gave a rating of 4; and 53 gave a rating of 5.

Barriers to Digital InvestmentOver a third (35 percent) of respondents said the maintenance costs of their legacy technology/architecture make it difficult to fund their digital technology investment.

Nearly a third (31 percent) said they are concerned with their legacy systems ability to support increased activity and capability as a result of, and with implementation, of new digital initiatives, while 32 percent said they lack an Enterprise Digital strategy.

A fifth (22 percent) said their organization lacks the right skills to make effective use of digital technology; while 24 percent said that their business priorities lie elsewhere and that digital technology investment is not a priority for senior management.

Positive Financial ImpactNearly a third (30 percent) of respondents said mobility will have the most significant positive financial impact on their busi-ness in 2015-2016, followed by 22 percent identifying digital wallets; 15 percent chose omnichannel capabilities.

A tenth (11 percent) identified analytics and big data, while 8 percent identified the Internet of Things, and 8 percent tokeniza-tion/HCE (host card emulation).

Top Customer Experience-related Payments Technology TrendsA fifth (20 percent) of respondents identified tokenization as the top customer experi-ence-related trend in payments technology, followed by 17 percent identifying biomet-rics and 14 percent selecting merchant-driven loyalty schemes.

Also, 14 percent identified standardized plat-forms and utilities, 12 percent virtual cards,10

EXECUTIVE SUMMARY


EXECUTIVE SUMMARY

Anti-fraud technologiesOver half (51 percent) of respondents iden-tified authentication controls over mobile device-initiated payments as necessary to reduce payments fraud, while 45 per-cent identified authentication controls over Internet-initiated payments.

Over a third (37 percent) identified replacing card magnetic-stripes with EMV chips, 38 percent identified tokenization of sensitive information, and 14 percent said improved in-formation-sharing methods on emerging fraud tactics. Also, 13 percent identified industry-specific education on payment fraud-preven-tion best practices, and 21 percent identified consumer fraud-prevention education.

Regulatory ComplianceAsked how prepared their company is to handle the evolution of regulatory frame-works over the next five years, nearly half (46 percent) of the 252 respondents to this question, answered 4 or “5 extremely prepared.” Just nine respondents answered “1 not prepared at all;” 34 answered 2; 92 answered 3; 92 answered 4; and 25 answered 5.

Maximizing Revenue GrowthA fifth (20 percent) of respondents said companies will maximize revenue growth from digital services and solutions through alliances and partnerships within the pay-ments ecosystem.

Just over a fifth (22 percent) said enhanced payment transaction capabilities will help maximize revenue growth from digital; and 14 percent said loyalty programs will help with this goal.

Nearly a fifth (18 percent) identified highly targeted marketing and offers, 14 percent

Over a quarter (26 percent) said they don’t plan to create a secure cloud environment or to migrate to open source.

Partners for Digital InitiativesNearly two-thirds (63 percent) of respon-dents said the most attractive attribute of a potential partner to support their digital initiatives would be a company with pay-ments industry experience and focus, while 22 percent said a partner organization with leadership and appropriate ecosystem.

A third (33 percent) said a potential partner needs to have creative capabilities, while 42 percent identified customer experience expertise, and 22 percent identified the ability to help them map customer journeys and the impact on their core systems.

Nearly a quarter (23 percent) identified being a multinational player as the most attractive attribute.

Also, 23 percent identified providing an end-to-end turnkey solution, 37 percent said application and technical expertise, 23 percent said customer service and help-desk support capabilities, and 39 percent said systems integration experience.

New Approach: AiKiDoThe cost and complexity of maintain-ing legacy systems combined with the advances at lightning speed being made by non-traditional payment players pose enormous challenges for payment services organizations’ digital journey.

Infosys has formulated AiKiDo, a revolution-ary approach that systematically harvests and curates enterprise knowledge to renew existing technology landscapes, optimize business processes and drive rapid innova-tion. Additionally, this innovative approach

said revenue growth would be maximized through integration with other delivery chan-nels, and 10 percent said through faster and targeted new product launches.

Investment PlansTechnology roadmap refresh activities, plat-form migration and investments in a secure cloud environment and open-source platform are important priorities for respondents.

Forty percent of respondents said their organization’s IT department is implement-ing or planning to implement technology roadmap refresh activities and/or platform migration, re-hosting or replacement in 2015-2016.

Just over a fifth (22 percent) are only planning platform migration/replacement, while 14 percent are only planning technol-ogy refresh activities, and 24 percent said their IT department isn’t planning to imple-ment either.

Nearly half (42 percent) said they plan to create a secure cloud environment and move to open source. While 25 percent said their organization is re-examining its IT infrastructure in order to create a secure cloud environment but not to migrate to open source. However, 6 percent said their organization does not plan to create a secure cloud environment but will migrate to open source.


EXECUTIVE SUMMARY

based on a Japanese philosophy of effec-tively capturing knowledge and energy en-ables Infosys’ clients to find and define their own unique path forward to identify unique areas to renew using a Design Thinking methodology. This is not about best practices or fitting known solutions to well-understood problems. Instead, it is about identifying and prioritizing the right problems and solving them in a rapid, iterative, innovative, and dif-ferentiated manner.

Aikido is a Japanese martial art concept which is often translated as the “way to unify life energy.” Infosys has built on this concept in the payments arena by developing an ap-proach that defines the Ai as the intellectual power or the energy brought to its clients through platforms and platform services. Ki is the ability to extract, curate, and using non-disruptive technology, to renew enterprise knowledge for optimization. Do stands for the path or the way forward powered by the potency of a Design Thinking approach. All three help in the transformational design and implementation of digital experiences in the payments space.


Digital wallets, mobile payments, Blockchain technology, the Internet of Things, HCE, NFC, tokenization, biometric security and Faster Payments are part of the new digital payment technologies that are disrupting and transforming the landscape of the payments ecosystem.

Payments services organizations realize that they need to augment their legacy pay-ment systems with enhancements to reduce maintenance costs while achieving customer expectations, and keep up with the constant changes in the marketplace.

Digital CommerceInnovative players such as Amazon have set a high benchmark for e-commerce customer experience. Yet customers face challenges when using many e-commerce websites, in-cluding complicated navigation, inconsistent pricing, lack of a one-click checkout, friction when redeeming loyalty rewards and poor data security.

There is a clear need for payment service providers to partner with others including their own clients to improve the customer experi-ence and security in the e-commerce space

INTRODUCTIONBusiness-to-business (B2B) payments is an area of the payments ecosystem that is look-ing to modernize its legacy systems and pro-cesses while implementing new technologies and processes to satisfy customer needs.

Reportedly, half of all payments received by a typical organization are in check form, which is even more pronounced among SMEs where 60 percent of transactions are paper-based. Payments providers can leverage technology to drive the digitization of B2B transactions and end-to-end auto-mation by incentivizing the use of digital payments instruments and developing new revenue-generating digital offerings for li-quidity management, financial supply chain integration, and the B2B purchase-to-pay value chain.

Digital wallets continue to provide a key new opportunity in digital commerce. The launch of Apple Pay has given digital wallets a fresh impetus, as Apple has ad-dressed many of the problems with earlier mobile wallets such as security (through tokenization and fingerprint ID), service reliability (by making both the payment technology and the device that runs it) and acceptance (by assembling an impressive roster of retailers and FIs).

Similar offerings from Samsung (Samsung Pay) and Google (Android Pay) will help drive consumer demand and merchant acceptance of digital wallets. Also, HCE will help the Android ecosystem to provide digi-tal wallet services through a cloud-based software solution.

Customer ExperienceConsumers have high expectations from payment services: freedom to choose from a range of innovative products; simple experiences that minimize friction; uninter-rupted service 24/7 and across channels; and security and privacy.

As payments providers seek to deliver an integrated customer experience, they can draw inspiration from companies such as Amazon and Uber, whose payment pro-cesses are quick, streamlined and one-touch. Also, customers expect a Netflix-style

“The acceptance of emerging payment acceptance form factors (the Internet of Things, smartphones, wearables), wallets (Apple Pay, Android Pay, Samsung Pay, Merchant Customer Exchange [MCX]) and the need to secure payments from fraud are forcing merchants to move to a more flexible and modern payment architecture.”— Narayan Sivaram, Vice President and Regional Head of Cards and Payments at Infosys.


experience across channels, in which they can pick from one channel what they left in another channel.

Providers can breathe new life into customer experience by personalizing it to meet the customer’s needs and context. For example, credit card issuer Barclaycard’s customers are targeted with “bespoke” offers based on their demographic characteristics, prefer-ences and current location.

Renewing the customer experience through personalization enhances conversion rates and engagement to improve the efficacy of customer relationship management.

Customer self-service platforms can be simplified and enhanced to become predic-tive and based on real-time variables such as browsing patterns and transaction history, response to previous marketing campaigns, and demographics.

In the cross-border remittance market, key players are vastly improving customer ex-perience with online and self-service kiosks supplementing traditional agent-based models. Many new remittance players have opted for digital-only platforms provid-ing highly competitive alternatives to exist-ing providers.

OmnichannelA leading analyst says that three billion peo-ple on the planet will create eight zeta bytes of data in 2015, and almost all of them want to be able to buy, receive and return goods across channels. This is the customer view of an omnichannel experience — one that is consistent, seamless and portable across all channels and access devices.

For payments providers, this means ac-quiring the right technology infrastructure complete with new solutions such as big data

analytics, which will enable them to see an integrated customer view at all touch points and empower front-line staff on every chan-nel with the same real-time data so they take efficient, timely and consistent actions. Omnichannel is one of the most exciting new opportunities awaiting payments.

There is a proliferation of apps and an ever-growing need for payments. For example, Uber’s simple app has revolutionized the way we hail cabs. Payment set-up is a one-time activity and totally embedded in the experience. Uber underscores the need for payments players to have a presence that is native to any app and accessible on any channel at any moment of need.

With its huge customer and merchant base, PayPal is a real catalyst in omnichannel digital payments. For example, it strength-ened its stake in the point-of-sale mobile payments market through its February 2015 acquisition of U.S.-based mobile wallet provider Paydiant.

In September 2015, PayPal launched its PayPal.Me mobile payment service, which emulates Venmo, the mobile P2P app PayPal bought in 2014. PayPal.Me is designed to be easier to use than PayPal’s existing Internet-based P2P payment service, enabling users to send their personal PayPal.Me link to friends, relatives and co-workers around the world via SMS, email and social media.

Security and ComplianceWith the rising number of data breaches and card fraud attacks, security is clearly a top priority for payments companies and FIs, and regulatory compliance is one of their biggest challenges.

As the level of regulatory mandates and oversight increases steadily — for example, the Credit Card Accountability, Responsibil-ity and Disclosure (CARD) Act, Consumer Financial Protection Bureau (CFPB), Single Euro Payments Area (SEPA), Foreign Account Tax Compliance Act (FATCA), Basel III and Payment Card Industry Data Security Standard (PCI DSS) — payments providers face rising reporting, compliance and penal costs.

This challenge can become a competitive advantage for organizations that carefully plan and implement their compliance strate-gies. IT plays a key role in this space, not only as the technology backbone enabling monitoring and compliance, but also by providing next-generation analytics solutions that can detect and prevent fraud attempts.

The move to EMV chip cards provides a new thrust to renew the point-of-sale (POS) payments infrastructure. Canada and Eu-rope saw a sharp fall in card fraud following their EMV migration. Meanwhile, the U.S., because of its retention of magnetic-stripe technology, has become a target for many types of fraud attacks such as skimming.

The U.S. is now finally adopting EMV stan-dards, as issuers roll out EMV cards and acquirers migrate POS terminals and ATMs to EMV.

However, EMV doesn’t address all card security risks, as recent high-profile card data breaches have shown. This is forcing payments companies to accelerate the use

INTRODUCTION

https://www.paypal.me/


of tokenization to protect personally- identifiable information.

The card schemes’ mandate of upgrading U.S. merchant POS terminals to EMV by Oc-tober 2015 has increased the availability of NFC-enabled terminals in the U.S. According to Juniper Research, there will be 500 million NFC users by 2019 worldwide. Apple Pay and other similar payments technologies are expected to play a major role in accelerating NFC payments worldwide.

Cards and payments companies must embrace these measures, which will not just improve security and confidence in card payments, but also reduce the cost of complying with PCI DSS requirements and liability in the event of losses due to card-present fraud.

Big DataBig data-based approaches are indispens-able in deploying a range of threat-mitiga-tion measures, both real-time and periodic, which the payments industry’s increasingly stringent regulations mandate.

Issuers and acquirers can enhance their enterprise-wide fraud-management platforms by implementing machine learning and data-management techniques to detect fraud and financial crime such as money laundering and terrorist financing, by scanning all trans-actions and recognizing patterns that imply uncommon or suspicious activities.

Cards companies can maintain cardholder data history such as billing address, phone number, IP address, email address and de-vice fingerprints. This repository can be used for real-time risk assessment for card-not-present transactions.

Other measures that combat fraud include point-to-point encryption to protect data in

ageable, portfolio of card platforms through mergers and acquisitions.

Card management platform rationalization and modernization initiatives can include roadmap refresh, platform migration, plat-form re-hosting or platform replacement.

Faster PaymentsFaster Payments, adopted by over 20 countries, including the U.K., South Africa, Mexico, Nigeria, Poland, Sweden and Singapore, and in launch preparation in the U.S., Canada and Australia, is a new initia-tive focusing on rapid settlement in various segments of the payments space.

Faster Payments enables digital payment providers to offer innovative solutions to customers and retailers. For example, the U.K.’s Paym service provides mobile phone-based P2P transfers that leverage Faster Payments.

Faster Payments reduces counterparty and settlement risk for banks, reduces payment processing costs and accounts receivables for merchants, and provides convenience for consumers.

transit and tokenization to protect data at rest. Implementing these technologies will help alleviate merchants’ PCI-compli-ance obligations.

“Three key security technologies are increasingly important in the fight against payment fraud,” says Narayan Sivaram, Vice President and Regional Head of the Cards and Payments practice at Infosys. “Firstly, tokenization helps prevent data breaches as it removes the vulnerable PAN (personal account number) information from card transactions. Tokenization will continue to gain momentum as many payments net-works and processors actively promote it to merchants. Secondly, the U.S. is now taking its move to EMV more seriously. Thirdly, end-to-end encryption helps to secure the transaction process.”

Improving Business AgilityThe emergence of agile, advanced technol-ogy-based non-banking players is disrupt-ing the payments industry, and forcing an unprecedented pace of change. In today’s environment, business agility is both a com-petitive edge and a survival toolkit.

Opportunities for companies to modernize their core payments platforms range from implementing a payments hub to replacing legacy platforms. There is an opportunity to re-examine the infrastructure from the ground up to create a more elastic and secure private cloud and migrate to a highly agile, modern, and cost-efficient open-source platform.

A need for rationalization and modernization of card management platforms may become apparent when existing platforms aren’t able to quickly support new product launches and regulatory changes; or when the IT division has accumulated a larger, perhaps unman-

INTRODUCTION


SURVEY ANALYSIS

1. In which region is your company headquartered?

2. Which of the following best describes your organization? (Select all that apply.)

In the summer of 2015, ATM Marketplace and Mobile Payments Today surveyed 380 payments industry executives worldwide.

Of the 380 survey respondents, 46 percent are headquartered in North America, 19 percent in Europe, 18 percent in Asia-Pacific, 7 percent in Latin America/South America, and 9 percent in Africa.

North America

46%Asia-Pacific

18%

Europe

19%

Latin America/South America

7%

Africa10%

Payments network

23% Merchant services

20% Payment services provider

31%

Money services

15% Prepaid/stored

value card issuer

11% Loyalty services

provider 12%

E-commerce gateway 13%

Emerging payments provider

15%

Bank

27%

Payments Engineering 15%

Just under a third (31 percent) of respondents are payment ser-vices providers, while 27 percent are banks, 23 percent are pay-ments networks, and 20 percent are merchant services providers.

Other categories of respondents are money services providers (15 percent), prepaid/stored-value card issuers (11 percent), loyalty services providers (12 percent), e-commerce gateways (13 percent), payments engineering companies (15 percent) and emerging payments providers (14 percent).

Among the 74 companies who described themselves as “other,” categories listed included insurance, banking IT consultancy, fraud protection provider, retailer, online retailer, remittance wholesale services, financial services, mobile payments provider, ATM managed services provider, mobile wallet provider, mobile operator and NFC technology provider.


3. What is your organization’s approximate annual revenue?

4. How many employees work for your firm/organization worldwide?

5. Which of the following most closely describes your job title?

SURVEY ANALYSIS

Below US$500M 55% US$500M to

US$1B 16%

US$1B to US$5B 12%

Above US$5B 17%

Over half (55 percent) of respondents said their annual rev-enues are below $500 million, while 17 percent have revenues of over $5 billion. In addition, 15 percent have revenues of $0.5-$1 billion, and 12 percent have revenues of $1-$5 billion.

Less than 499 employees

50%

500 to 5,000 employees

20%

5,000 to 10,000 employees

9%

More than 10,000

employees

18%

Don't know 3%

Half (50 percent) of respondents said under 499 employees work for their organization worldwide, while 19 percent said their organization employs 500-5,000 people worldwide. In addition, 9 percent said 5,000-10,000 employees, and 18 percent said over 10,000 employees.

Just over a tenth (11 percent) of respondents said their job title is executive, 11 percent said vice president, 18 percent said director, 31 percent said manager, 17 percent said consultant, and 12 percent said “other.

Executive 11%

Vice President 11%

Director 18%

Manager

31%

Consultant 17%

Other 12%


7. Which of the following are business priorities for your digital strategy in 2015-2016? (Select all that apply.)

6. Which of the following most closely describes your current department into which you report?

SURVEY ANALYSIS

Focusing on customers is a major business priority for respondents’ digital strategy. Over two-thirds (69 percent) said gaining new customers is a priority in 2015-2016, while 35 percent identified increasing customer satisfaction metrics, and 40 percent said creating a unified experience for their customers.

Also, 40 percent identified offering their customers omnichannel options, 41 percent gaining a competi-tive edge over traditional and/or emerging com-petitors, 35 percent allowing for real-time payment transactions and settlement, and 37 percent provid-ing better security.

Half (50 percent) identified driving revenue and/or market share growth, 31 percent allowing for faster-to-market product introductions, 33 percent accom-modating regulatory requirements and changes, and 31 percent gaining better insights and better predic-tive data on their customers.

Other responses were: • Understanding the relative importance of channels/

devices in the customer experience; • Support clients in understanding and realizing their

requirements; • Financial inclusion - banking the unbanked.

The survey found that the majority of respondents work in departments with traditional titles such as IT and marketing, rather than in dedicated digital departments. Nearly a fifth (18 percent) of respondents work in IT, while 27 percent work in Marketing, 18 percent work in Operations, 11 percent work in Digital, 6 percent work in Treasury/Finance, and 20 percent said “Other.”

IT 18%

Marketing 27%

Operations 18%

Digital 11%

Treasury/Finance 6%

Other 20%

69%

35%

40% 40%

41%

35% 38%

50%

31% 33%

31%

Gain new customers

See a lift in our customer satisfaction metrics

Offer customers omnichannel options

Gain a competitive edge over our traditional and/or emerging competitors

Allow for real-time payment transactions and settlement

Allow for better security

Drive revenue and/or market share growth

Allow for faster-to-market product introductions

Accommodate regulatory requirements and changes

Gain better insights and better predictive data on our customers


9. How are you currently using digital to influence customer experience? (please select all that apply)

8. Which digital/commerce technology disruption do you feel has or will have the most significant positive financial impact for your business in 2015-2016?

SURVEY ANALYSIS

In addition, 11 percent identified analytics and big data, 8 percent the Internet of Things, 8 percent tokenization/HCE, 2 percent wearable technology, 2 percent robotics/drones, and 1 percent gamification.

Other key technologies identified by respondents were real-time clearing and settle-ment/instant payments, digital banking, using data to push more direct marketing campaigns and blockchain technology.

Mobility tops the list of digital technologies seen as offering the most significant positive financial impact on respondents’ businesses, with wear-ables, robotics/drones, and gamification at the bottom of the list.

Nearly a third (30 percent) of respondents said mobility will have the most significant positive financial impact on their business in 2015-2016, followed by 22 percent identifying digital wallets and 15 percent omnichannel capabilities.

Faster transaction capability tops the list of how respondents are using digital to influence custom-

er experience, followed by providing omnichannel capabilities.

Over a third (37 percent) of respondents said they are using digital technologies to better understand customer

dynamics, while 40 percent are using them for faster trans-action capability, 39 percent to provide omnichannel capa-

bilities for their customers, 35 percent to increase security and 36 percent to improve upselling/cross-selling opportunities.

Nearly a third (28 percent) are using digital technology to provide better on-boarding experiences, and 19 percent to improve visibility

into their system.

A third (32 percent) are using digital technology to give their custom-ers greater control and personalization, 37 percent to increase customer

self-service usage, 28 percent to enhance customer segmentation and tar-geted content marketing abilities, 28 percent to allow for faster new product

launches and 24 percent to improve their social media presence.

Mobility 30%

Digital wallets 23%

Omnichannel capabilities

15%

Analytics/Big Data 11%

Internet of Things (IOT)

Tokenization/HCE (host card emulation) 8%

8%

Wearable tech

Robotics/drone 2%

2%

Gamification 1%

40% Increase faster transaction capability

39% Create omnichannel capabilities for our customers

38% Better understand customer dynamics

37% Increase customer self-service utilization

36% Improve upsell/cross-sell opportunities

35% Increase security

32% Put greater control and personalization into the hands of our customers

28% Provide better on-boarding experiences

28% Enhance customer segmentation and targeted content marketing abilities

28% Allow for new and faster product introductions

24% Improve social media presence

19% Improve visibility into our system


10. How do you think companies will maximize revenue growth from digital services and solutions?

11. Please select which of the below you see as the top trend in payments technology as it relates to enhancing customer experience.

SURVEY ANALYSIS

The two top ways in which respondents believe their compa-nies will maximize revenue growth from digital services and solutions are enhanced payment transaction capabilities and payments ecosystem partnerships.

A fifth (20 percent) of respondents said companies will maximize revenue growth from digital services and solutions through alliances within the payments ecosystem, while 22 percent said through enhanced payment transaction capabili-ties, and 14 percent said through innovative loyalty programs.

Nearly a fifth (18 percent) identified highly targeted marketing and offers, 14 percent said through integration with other deliv-ery channels, and 10 percent said through faster and targeted new product launches.

One respondent said companies can maximize their revenue growth from digital through integrated personalized device-agnostic approaches.

20% Through alliances within the payments ecosystem

22% Through enhanced payment transaction capabilities

14% Through innovative loyalty programs

18% Through highly targeted marketing and offers

14% Through integration with other delivery channels

10% Allow for faster and targeted new product introductions

Tokenization

20%

Biometrics

18%

Standardized platforms and utilities

14% Merchant-driven loyalty schemes

14%

Virtual cards

12%

SaaS

11%

Blockchain technology

8% Artificial Intelligence 3%

A fifth (20 percent) of respondents identified tokenization as the top customer experience-related trend in payments technology, followed by 17 percent identifying biometrics and 14 percent merchant-driven loyalty schemes.

In addition, 14 percent identified standardized platforms and utilities, 12 percent virtual cards, 10 percent Software-as-a-Service (SaaS), 8 percent blockchain technology and 3 percent artificial intelligence.

Several respondents identified NFC/contactless mobile payment systems such as Apple Pay and Android Pay.


12. What are the primary factors that you feel may be preventing you from being more effective with your digital technology initiatives? (Select all that apply.)

13. How confident are you that your company is prepared to handle security threats? (1 not confident at all, 5 extremely confident)

SURVEY ANALYSIS

Maintaining legacy systems is the top factor identified by respondents as hindering them from being more effective with their digital technology initiatives.

Over a third (35 percent) of respondents said the mainte-nance costs of their legacy technology/architecture make it difficult to fund their digital technology investment. Nearly a third (31 percent) said they are concerned about their legacy systems’ ability to support increased activity and capability as a result of new digital initiatives, while 32 percent said they lack an enterprise digital strategy.

Under a third (28 percent) don’t fully understand all the prod-ucts and capabilities needed and the implications for their busi-ness, primarily because of the diverse technology landscape.

A fifth (22 percent) said their organization lacks the right skills to make effective use of digital technology, while 24 percent said that their business priorities lie elsewhere and that digital technology investment is not a priority for senior management.

Nearly two-thirds (60 percent) of the 252 respondents to this question rated their company’s readiness to handle security threats as either 4 or “5 extremely confident.”

Just seven rated their confidence that their company is prepared to handle security threats as “1 not confident at all.” Also, 24 gave a rating of 2, 71 gave a rating of 3; 97 gave a rating of 4; and 53 gave a rating of 5. The average rating was 3.65.

32% We lack an enterprise digital strategy.

24% Business priorities lie elsewhere – digital technology investment isn't a priority for senior management.

22% Our organization doesn't have the right skills required to make effective use of digital technology.

28% We don’t fully understand all the products and capabilities needed and the implications for our business because of the diverse technology landscape.

32% We are concerned about our legacy systems' ability to support increased activity and capability as a result of new digital initiatives.

35% The maintenance costs of our legacy technology/architecture make it difficult to fund our digital technology investment.


14. What new or improved methods do you feel are most needed to reduce payments fraud? (Select the top three you think would be most effective.)

SURVEY ANALYSIS

The two top payment fraud prevention methods identified by respondents are authentication controls over mobile device- initiated payments and authentication controls over Internet-enabled payments.

Over half (51 percent) of respondents identified authentication controls over mobile device-initiated payments as necessary to reduce payments fraud, while 45 percent identified authentication controls over Internet-initiated payments.

Over a third (37 percent) identified replacing card magnetic-stripes with EMV chips, 38 per-cent said tokenization of sensitive information, 14 percent said improved information-sharing methods on emerging fraud tactics, and 13 percent said industry-specific education on pay-ment fraud-prevention best practices.

In addition, 21 percent identified consumer fraud-prevention education, 8 percent said more aggressive law enforcement, and 2 percent identified image-survivable business check security features.

Other answers provided by respondents included one-time passwords/passcodes; improved security on mobile devices; PINs for credit card transactions; and the use of PINs, biometric security and tokenization.


15. Which of the following security technologies/initiatives do you plan to invest in or have already invested in? (Select all that apply.)

16. How prepared is your company to handle the evolution of regulatory frame works over the next five years? (1 not prepared at all, 5 extremely prepared)

SURVEY ANALYSIS

Unsurprisingly, EMV tops the list of security tech-nologies which respondents have either invested in or plan to invest in.

Half (50 percent) of respondents said they have either invested in or plan to invest in EMV, while 46 percent said tokenization, 46 percent said real-time fraud-prevention practices, and 31 percent said HCE.

Nearly a third (31 percent) have either invested in or plan to invest in biometric authentication techniques such as fingerprint scanning or voice authentication, while 37 percent said data-driven analytics and pre-dictive analysis for fraud management.

Other responses included end-to-end encryption, biometrics (“because customers trust their own biometric data, biometrics will win over other security technologies”), mobile security measures and NFC.

Of the 252 respondents to this question, nearly half (46 per-cent) rated their company’s readiness to handle the evolution of regulatory frameworks over the next five years as either 4 or “5 extremely prepared.”

Just nine of the respondents answered “1 not prepared at all;” 34 answered 2; 92 answered 3; 92 answered 4; and 25 answered 5. The average rating was 3.36.


17. Please list areas that you think will be affected by increased regulatory requirements in the payments ecosystem in 2015-2016.

SURVEY ANALYSIS

• Responses to this question included:

• EMV issuance and migration;

• Card brands’ EMV liability shift regula-tions;

• Payment fees;

• Internet- and mobile-based e-com-merce;

• Business continuity;

• Security;

• Settlement timing;

• Transaction time and cost;

• Customer identity requirements;

• Product to market processes;

• Mobile payments;

• Mobile wallet integration;

• Licensing of mobile payments;

• Access to accounts (XS2A) requirements included in the new European Union Payment Services Directive will be an in-teresting challenge in the next few years;

• Multichannel payment security;

• Further regulation of bitcoin;

• Virtual currencies;

• Blockchain;

• Cost of technology, cost of deployment, customer experience;

• Data protection;

• Central banks will want to bring in regulation for financial tech companies to remove systemic and settlement risk;

• Big data, digital identity, service identity providers;

• Enabling any party other than banks to handle financial transations;

• Compliance costs;

• Operational expenses;

• STP (straight-through processing);

• More mergers;

• Biometrics;

• Tokenization;

• Debit card holds at POS;

• KYC level — channel access and trans-action value; mobile user authenticity;

• PCI;

• ACH (automated clearing house);

• Payment-processing platforms;

• Communication channels (SSL/TLS – Secure Sockets Layer/Transport Layer Security) encryption;

• Cardholder data capture, storage and transmission;

• P2P payments;

• Authentication, AML;

• Micro-payments;

• Data storage and application security constraints;

• The overall U.S. payments infrastructure. The federal authorities want the U.S. payments infrastructure to become faster and more efficient, so they will use this as the entry point into updating their regulatory requirements.

• Interoperability;

• Guidelines of the European Banking Au-thority (EBA) and the European Payment Services Directive 2 for Internet-initiated and mobile payments and account ac-cess. These guidelines are based on the Forum on the Security of Retail Pay-ments (SecuRe Pay);

• Money laundering;

• Remittances;

• Slower payment transaction speeds;

• Increased recurring costs;

• New equipment costs.

http://www.fisglobal.com/ucmprdpub/groups/public_searchable/documents/webasset/c038915.pdf

http://www.eba.europa.eu/regulation-and-policy/consumer-protection-and-financial-innovation/guidelines-on-the-security-of-internet-payments


18. How has management driven alignment between IT and different business units around digital? (Select all that apply.)

19. Is your organization re-examining your IT infrastructure in order to create a secure cloud environment and migrate to a highly agile open-source platform?

SURVEY ANALYSIS

The IT department continues to oversee their company’s digi-tal strategy rather than a dedicated digital team for the largest share of respondents to this question. Only a small number of respondents have a digital center of excellence at their organization.

Nearly a quarter (24 percent) of respondents said the person at their company who is responsible for digital strategy reports to the CEO, while 43 percent said their IT organization over-sees their company’s digital strategy.

Over a quarter (26 percent) said their company has imple-mented a cross-organizational digital task force, while 17 percent said their company has hired or is hiring a chief digital officer to oversee digital initiatives, and 13 percent have a cen-tralized digital center of excellence to drive digital adoption.

Other responses included “not well organized,” “outsourced,” “it remains a product-driven initiative, with broad support from IT and external vendors,” “we are haphazardly forging ahead, despite calls for an enterprise-wide digital strategy” and “no structure in place.”

Just under half (42 percent) of respondents said their organization is re-examining its IT infrastructure in order to create a secure cloud environment and migrate to an open-source platform.

A quarter of respondents (25 percent) said their organiza-tion is re-examining its IT infrastructure in order to create a secure cloud environment but not to migrate to open source.

However, 6 percent said their organization does not plan to create a secure cloud environment but will migrate to open source.

Over a quarter (26 percent) said they don’t plan to create a secure cloud environment or to migrate to open source.

Yes - cloud only

25%

Yes - open source only

6% Yes - both

42%

No - neither

27%


20. Is your organization’s IT department implementing or planning to implement technology road map refresh activities and/or platform migration, re-hosting or replacement in 2015-2016?

21. When thinking of a potential partner for helping implement and support digital initiatives, which of the following attributes would be most attractive for your firm? (Select all that apply.)

SURVEY ANALYSIS

As part of a “new and renew” strategy, technology roadmap refresh activities, platform migration and investments in a secure cloud environment and open-source platform are important priorities for respondents.

Forty percent said their organization’s IT department is implementing or plan-ning to implement technology roadmap refresh activities and/or platform migra-tion, re-hosting or replacement in 2015-2016.

Just over a fifth (22 percent) are planning only platform migration/replacement, while 14 percent are planning only technology refresh activities, and 24 percent said their IT department isn’t planning to implement either one of the above.

Nearly a quarter (23 percent) identified being a multinational player as the most attractive attribute, 22 percent said regional presence, and 16 percent said niche platform and specialist digital provider.

Nearly a quarter (23 percent) said providing an end-to-end turnkey solution, 37 percent said application and technical expertise, 23 percent said customer service and help-desk support capabilities, 39 percent said systems integration experience, and 13 percent said a strong corporate brand.

One respondent identified the need for the partner organization to offer “flexibility to meet our needs quickly and inexpensively.”

For the majority of respondents, it is important to select a digital initia-tive partner with payments industry experience and focus, as well as customer experience expertise.

Nearly two-thirds (63 percent) of respondents said the most attrac-tive attribute of a potential partner for their digital initiatives would be payments industry experience and focus, while 22 percent said leadership and an appropriate ecosystem.

A third (33 percent) said creative capabilities, while 42 percent identified customer experience expertise, and 22 percent said the ability to help them map customer journeys and the impact on their core systems.

Yes - tech refresh only

14%

Yes - platform

migration/replacement

only

22%

Yes - both

40%

No - neither

24%

63% Payments Industry experience and focus

42% Customer experience expertise

39% Systems integration experience

37% Application and technical expertise

33% Creative capabilities

24% Has an end-to-end turnkey solution

24% Customer service and helpdesk support capabilities

23% A multinational player

22% Leadership/ecosystem at partner organization

22% Ability to help us map customer journeys and the impact on our core systems

22% Regional presence

16% Niche platform and specialist digital provider

13% Strong corporate brand


Despite advances in digital payments, trillions of dollars in cash are still in circulation worldwide. In the U.K. alone, there were just over 18 billion cash payments in 2014, and cash was used by consumers for 53 percent of transactions, according to Payments UK. The Federal Reserve estimates that in August 2015 $1.38 trillion in U.S. currency was in circulation.

To drive these cash payments to digital payments, all participants in the payments industry, from incumbent payments services organizations to non-banking and emerging payments providers, and online and bricks-and-mortar merchants, need to work to make digital payments more convenient, faster, easier, secure, and seamless across multiple channels for consumers. Govern-ments and regulators like this too!

Existing players are far too often stifled by legacy systems that hold them back. The upstarts and the FinTechs are making bold forays with their focus on user experience and eliminating the friction inherent in payments.

For most players, the way forward involves adopting a strategy of renewing existing infrastructures and introducing new technolo-gies – “renew the old, ring in the new.” As part of this “new and renew” transformation process, technologies such as mobility, NFC, digital wallets, tokenization, real-time clearing and settle-ment, and omnichannel integration are key.

While being digital is essential, players need to scale globally for growth, given the global nature of Internet- and mobile-based e-commerce.

Teaming up with an experienced and creative multinational part-ner with payments industry expertise will be essential to success-fully navigate the “new and renew” transformation process.

The burden and complexity of legacy combined with the lightning speed advances being made by non-traditional payment players pose enormous challenges to payment services organizations’ digital journey.

Infosys has formulated AiKiDo, a strategic offering that will help firms charter a non-disruptive renewal of their core legacy, lever-age the power of Infosys IP to incrementally build on the legacy to

CONCLUSIONrealize exponential benefits, unleash the value of design thinking to identify and solve significant problems, and pave the path forward.

Ai is the intellectual power or the energy brought to the client through Infosys platforms and products. Ki is the Infosys service which extracts, curates and, using non-disruptive technology, renews enterprise knowledge for optimization. Do is the Infosys service which defines the path forward powered by the potency of Design Thinking.

ABOUT INFOSYS:

Infosys is a global leader in consulting, technology, outsourcing and next-generation services, enabling clients in over 50 countries to stay ahead of emerging business trends and outperform the competition.

Our experience gives our clients a distinct advantage. In addition to helping them manage their business, we power their transformation to a smarter organization as well. This allows them to focus on their core business priorities.

Infosys provides enterprises with strategic insights on what lies ahead. We help enterprises transform and thrive in a changing world through strategic consulting and the co-creation of breakthrough solutions in areas such as mobility, big data and cloud computing, including key Enterprise business platforms Our focus on prod-ucts and platforms, coupled with our dedication to training through the world’s largest Corporate University and large investment in Research and Development, has resulted in a 98 percent repeat business rate. Additionally, Infosys is one of the only global technol-ogy services and consulting organizations to have a dedicated Cards and Payments practice as an adjunct to its core Financial Services offerings focused on leading edge domain-led transforma-tion offerings across key payments areas, while working to develop 360 degree relationships with clients and co-creating joint solutions to meet market imperatives.

An entrepreneurial adventure that began with seven engineers and $250, Infosys is now a publicly traded company driven by 179,000+ innovative employees and annual revenues of over $8.7 billion.

Visit www.infosys.com and http://www.infosys.com/services/aikido/ to see how Infosys (NYSE: INFY) is helping enterprises renew themselves while creating new avenues to generate value.



http://www.infosys.com/

http://www.infosys.com/services/aikido/


REFERENCES“Cards and Payments: Renew the Old, Ring in the New”Infosys Ltd Perspective report by Narayan Sivaram, Vice President and Regional Head of Cards and Payments at Infosyshttp://www.infosys.com/industries/cards-and-payments/resources/Documents/cards-payments-renew.pdf

Infosys cards and payments white papershttp://www.infosys.com/industries/cards-and-payments/resources/Pages/index.aspx

“Innovation in Retail Banking 2014” reportEFMA and Infosys http://www.infosys.com/newsroom/press-releases/Pages/banks-emerging-markets-investing-ambitiously.aspx http://www.experienceinfosys.com/innovation-index

ATM Marketplacehttp://www.atmmarketplace.com/

Mobile Payments Todayhttp://www.mobilepaymentstoday.com/

“Mobile Payments Security 101” report, by Robin ArnfieldMobile Payments Todayhttp://www.mobilepaymentstoday.com/whitepapers/mobile-payments-security-101/

Virtual Currency Todayhttp://www.virtualcurrencytoday.com/

http://www.experienceinfosys.com/innovation-index

http://www.atmmarketplace.com/

http://www.mobilepaymentstoday.com/

http://www.mobilepaymentstoday.com/whitepapers/mobile-payments-security-101/

http://www.virtualcurrencytoday.com/